Interview: Daniel Lee
No need to be hub and spooked...
Hub and spoke is not for everyone but it can stop independents losing even more control to the big, vertically integrated companies, says Daniel Lee. The founder of Pharmacy2U and CEO of HubRx talks to Neil Trainis…
“You make me blush,” Daniel Lee says smiling when asked if he thinks he is best defined as a pharmacist or businessman. There is no denying that the man who founded the UK’s first internet pharmacy, Pharmacy2U, 22 years ago has an entrepreneurial flair but the current chapter in his remarkable journey is succinctly summed up by a few words in his bio on the website of his latest enterprise HubRx.
It is official. Daniel Lee “has returned to his independent pharmacy roots.”
HubRx is a company that says its mission is to “transform community pharmacy” by creating the UK’s first centralised automated dispensing facility for independents. It says it wants to free them up from dispensing so they can focus on clinical services, thus allowing them to generate greater revenue and compete more effectively with the multiples.
And so Daniel’s eyes are firmly fixed on his latest venture, a large-scale dispensing hub for independents at Logic Leeds business park. HubRx has signed contracts to acquire and develop a 3,000 square metre dispensing facility there and he is optimistic the work will be completed by August next year.
The vision is a facility that will provide hub and spoke dispensing for as many as 200 independent pharmacies up and down the country with the capacity to handle around 1.25 million items a month.
He says the project excites him and, compellingly, suggests it serves an important purpose, namely to get independents out from behind the dispensary and into services. By his own admission, his launch of HubRx is partly driven by a personal desire to give something back to independents, so he is asked if he feels any guilt that Pharmacy2U, the pioneering digital creation he launched in 1999, has been something of a nemesis of independents and possibly all bricks-and-mortar pharmacies. That existential threat will be intensified by Amazon in the coming years. But he has no regrets about the past.
“It’s not guilt,” he says firmly, “because pharmacies have got to look after themselves.” It is hard to argue with that assessment.
“It’s been fascinating and you know what, I wouldn’t change anything. Sometimes, even with the HubRx experience, for whatever reason, I have an ability to sort of, maybe not predict but see how things should map out and so I pioneered the digital pharmacy experience.
“Pharmacy2U was the first online pharmacy in the UK and that was way ahead of anybody else. Pharmacy2U is doing north of 1.2 million items a month and it’s the largest distance-selling pharmacy in the UK and I’m really proud of what we’ve achieved there but it came at some cost because it was competitive and disruptive to independent pharmacies.
“My background was always that. I’ve had this feeling that I’ve wanted to try and give something back if I can develop some of the learnings that we’ve done over the last 20 years.
“Ultimately, I’m born and bred a pharmacist, genetically coded, it’s in me and I want to try and do something…it’s not just about business or making money, there is an altruism here about giving something back to the profession and get them to upskill. That was always something that drove me mad as a young pharmacist working for my family.”
Amazon is Pharmacy2U
Daniel insists that “if it hadn’t been for Pharmacy2U or me it would’ve been someone else at some point” and warns independents not to ignore the technological advances that are having, and will continue to have, significant implications for their businesses.
“Pharmacists have got to look to the future. It’s been said many times about pharmacists, burying their heads in the sand to new technology. The fear now is Amazon but Amazon is Pharmacy2U, it’s the same model.
“Since we launched Pharmacy2U, I think it’s something like 370 distance-selling pharmacies, so independent community pharmacists today, if they’re not a DSP but they’re in community and they haven’t got a digital side to their business, then they’re not thinking about the future because ultimately, it’s about the patient.
“We are here to serve the patient and if the patient wants to go via a distance-selling pharmacy or they want to go to their local pharmacy, then it’s down to the patient. That enshrinement which has always been there is absolutely right.
“Amazon started that…Jeff Bezos, early in his career, said you start with the customer and work backwards. Pharmacies historically were closed for lunch, wouldn’t open on Saturday, you work around me and not the other way round.
“That whole customer service has to be turned on its head. If you look five, 10 years ahead, what does the patient want and how does the patient want to interact with their pharmacist.”
Proposals in the Medicines and Medical Devices Bill on rolling out hub and spoke across community pharmacy will undergo a public consultation but concerns and reservations are lingering. In 2016, the National Pharmacy Association, PSNC and Numark told the Department of Health and Social Care that evidence of the benefits of hub and spoke was lacking. Only last year the NPA said that, based on its own research in the UK and abroad, hub and spoke dispensing was not necessarily safer or more cost effective.
Its head of corporate affairs Gareth Jones said: “Independent data and evidence does not clearly establish either an economic case or a health outcomes case for large scale automation. That doesn’t mean there is no future for hub and spoke but it should give policy makers pause for thought. It raises serious questions about the underlying case for investing in models that allow hub and spoke to operate between different companies.” Daniel insists that “like anything,” hub and spoke is “not for everybody.”
“It will suit some people and this isn’t an all-or-nothing opportunity, this is for those I feel are definitely wanting to free up their capacity, have reached a point where they are saturated with their dispensing but also can see the future where with dispensing income reduced, these are highly trained clinicians who should be utilising what they’ve been trained to do and are able to offer some of the suite of services that they can do for a higher margin.
“Yes, of course we have issues around interoperability, level playing field, margin but I think the key thing for why the NPA and maybe some others were reticent…you’re going back five years from the NPA study and I think there’s definitely a movement towards it…is because they felt that maybe it was the big boys that were going to operate this and therefore take away some of the commerciality.
“I think that what HubRx has done and the reason why Mike Hewitson has joined my board - and he was the author of the NPA report - is because of the uniqueness of our model. It is that transparency, the commercial transparency, that means pharmacists are not losing even more control to the big, vertically integrated companies.”
Strongly refutes NPA’s comments
Daniel is reminded that Jones’s cautious remarks about hub and spoke were made just last year. Daniel says he “strongly” refutes what he said.
“We're working really closely with the NPA and again, it's back to choice. I think what Gareth is saying is he's looked at multiple hub and spokes around the world back in 2016 and still retains the view that there aren't efficiencies.
“I've run the largest dispensing facility in the UK for a number of years and I can absolutely confirm that there are purchasing benefits, there are efficiencies through automation and there are accuracy improvements by making sure the automation checks the product. So I refute what Gareth says there very strongly.
“What I do agree with him is we're not saying we're going to be able to reduce the total cost of dispensing because there's still an element that needs to be done in the branch and an element that needs to be done in the hub. What we're about, and I think we agree professionally, is this is about capacity creation.
“We can create by allowing the spoke to send 60 to 70 per cent of their repeat prescriptions by automating that dispensing process, so we're working on one click dispensing with our PMR partners. It allows the pharmacy to free up with the same cost base but moving to NHS services and/or private services. So the CPCS consultation service, NMS, post-Covid, there's got to be a role for pharmacists in the health of the nation, in obesity prevention, we've got to do this.
“Now listen, as I've said, if pharmacists have already got that capacity, great, but if you can outsource your dispensing for less money with the same cost base and move into services that you're going to get paid more because the margin on clinical services is greater...it's £14 for a CPCS, it's £28 for an NMS...it's going to be professionally satisfying and better for the pharmacist. But you're absolutely right, there's definitely a transformational shift required for pharmacists to do this that we've been about for a long time and there does need to be that catalyst for change.”
The cost to independents
The cost of hub and spoke to independents has to be considered. What will hubs charge spokes for their service and how hard will this hit independents in the pocket? After all, with the financial pressures and funding cuts they are enduring, some independents may struggle to pay hubs for their dispensing services.
“No, it’s the opposite,” Daniel insists. “The analysis that we’ve done shows that it costs an independent pharmacy £1.20, £1.30 to dispense a prescription item. At a certain size, an independent pharmacist cannot invest in the robotics and the automation that gives them the economy of scales and the reduction in their dispensing fee that we can do.
“HubRx is, in effect, investing in all the automation that provides for a reduced dispensing fee plus it’s more accurate because it’s automated and using the latest, sophisticated technology, so I think we can get to about half the cost, including our margin which is a service fee that a pharmacist currently costs themselves.
“So it’s not costing them any more. It’s actually costing them probably about half what it’s currently costing them and it free up their capacity. And it’s not all of their dispensing. The HubRx model is around between 60 to 70 per cent of their repeat dispensing, leaving them to focus to on the acutes that they need to, the walk-ins, the face-to-face which is their raison d'être plus improving their clinical services. So it’s absolutely not an increase in cost. Conversely, it’s a reduced cost for the dispensing.”
Daniel is asked what HubRx will charge independents to use its facility. “We haven't quite finalised the commercials but it's going to be approximately 70 pence which is about 50 per cent of their fee.”
There are other concerns around hub and spoke. For example, where does criminal liability lie if a patient is harmed as a result of a dispensing error? You could have a scenario where an error occurs at a hub run by a multiple and it is the independent spoke that suffers the legal consequences. In the HubRx model, Daniel says, “the clinical responsibility of the check of the prescriptions lies with the spoke and the accuracy check of the prescription once it's been clinically checked is with the hub.”
“We'll be clearly making sure that's within our legally binding contract that the pharmacy signs up to. I think the secondary legislation that we're engaged with currently will lay that out very clearly, so at the moment, this concern or where it lies...it will get sorted out but it will be determined so the pharmacist can move forward knowing who and where the responsibility is.”
General Data Protection Regulations presents another potential pitfall within the hub and spoke model. Has HubRx found a panacea for this, given it is not necessarily clear when and where a clinical assessment will take place and whether supervision by a pharmacist will be needed at the hub and the spoke?
“We believe so but again, it's all coming through in the engagement sessions with the Department of Health. We're comfortable we're on the right path to sorting out all of those issues,” Daniel insists.
“Of course you can talk about some of the areas that we've all got to agree on but in today's modern world with interoperable systems, many of those can get sorted out as long as there's a communal approach from all of the stakeholders and they agree on where the responsibilities lie. But the passing of prescription data happens today from GP systems via a spine to pharmacy systems multiple times.
“The actual dispensing side of that, the data requirement is much less because you're not passing all of the full patient information, so you don't need patient address, it can be on a patient identifier, so all you're passing through is the dispensed label information.
“Of course, we have looked at all of those areas, we've got to make sure we meet the highest of standards from a security perspective, from a GDPR perspective but from a HubRx perspective, that's why we're integrating with the PMRs because they are absolutely critical in ensuring we maintain the standards necessary to make this work.
“But that's HubRx. From a wider perspective, hub and spokes may not necessarily be highly automated dispensing facilities. They can be local co-operatives and so HubRx with our non-executive team, especially Mike, is trying to lead the industry here by setting what the gold standard should look like for those areas you've touched on because they're really important to us.”
Despite the issues and uncertainties, which Daniel unwaveringly believes will be resolved in good time, the project in Leeds has given him a new lease of life as an entrepreneurial pharmacist, just as he hopes it will give independents a new lease of life in their businesses.
“What we’ve got here is a real opportunity to bring the profession, especially the independent sector and giving them the capability they haven’t had for a number of years, something that has allowed the large multiples and others to benefit from systems and designs and logistics and automation.
“It is an exciting project but it’s early days. There’s a lot that I’ve learnt over the last 20 years that we’re trying to work with the PMR providers who are instrumental in this to allow for the use of technology.
“I’ve always been a huge fan of technology in automation to allow that to be the enabler to free up the pharmacist. We can support pharmacists who, no bones about it, they’ve been unbelievable through Covid.
“It’s early days but we’re super excited by the response we’ve had to the business launch and to what we’re building.”